Home Production as a Substitute to Market Consumption? Estimating the Elasticity Using Houseprice Shocks from the Great Recession

33 Pages Posted: 10 Mar 2016

See all articles by Jim Been

Jim Been

Leiden University - Department of Economics; Netspar

Susann Rohwedder

RAND Corporation

Michael D. Hurd

RAND Corporation; State University of New York at Stony Brook - College of Arts and Science - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: October 2, 2015

Abstract

The theory of home production suggests substitutability between market consumption and home production. The current paper estimates the intratemporal elasticity between home production and market consumption from within-person variation. Shocks in houseprices induced by the Great Recession are used to infer the extent to which persons adjusted home production in response to decreasing market consumption possibilities. By using a panel data set with detailed information on both consumption spending and time-use, we find an elasticity of -0.65. Although the scope for substitution is limited (about 12% of total consumption), there are non-negligible possibilities to substitute away from market consumption to home production.

Keywords: Home production, Time-use, Consumption, Wealth shocks, Great Recession

JEL Classification: D12, D13, D91, J22, J26

Suggested Citation

Been, Jim and Rohwedder, Susann and Hurd, Michael D., Home Production as a Substitute to Market Consumption? Estimating the Elasticity Using Houseprice Shocks from the Great Recession (October 2, 2015). Netspar Discussion Paper No. 10/2015-081, Available at SSRN: https://ssrn.com/abstract=2745152 or http://dx.doi.org/10.2139/ssrn.2745152

Jim Been (Contact Author)

Leiden University - Department of Economics ( email )

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HOME PAGE: http://www.law.leiden.edu/organisation/taxlawandeconomics/economics/staff/been.html

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Susann Rohwedder

RAND Corporation ( email )

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Michael D. Hurd

RAND Corporation ( email )

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State University of New York at Stony Brook - College of Arts and Science - Department of Economics ( email )

Stony Brook, NY 11794
United States

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
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